Money Professionals Get Personal

Companies Scramble To Help Small Investors

As Americans watch the values of their retirement savings plans swell with stock-market gains, there's no shortage of financial-service providers that want to help manage those assets.

More than $1 trillion is in 401(k) retirement plans. More than $1 trillion more is socked away in individual retirement accounts.

The number of households with at least $500,000 in investable assets (not counting home equity) or earning at least $100,000 a year has climbed to one of every six U.S. families, according to Spectrem Group, a consultant to financial-service companies.

That kind of democratization of wealth has introduced more Americans than ever to the challenges of asset management. And they're willing to ask for - and pay for - professional help.

But on their terms.

They want to get all their financial services from one source, according to studies such as the one published late last year by Mark P. Hurley, president of Undiscovered Managers, a Dallas investment firm. They want a comprehensive financial map with the focus on the long term.

And assuming the advice they get is better than they can find - for free - on the Internet, they prefer to pay a fee for it, rather than paying commissions on each transaction.

A commission-driven system to fees has already started.

Merrill Lynch, the country's largest brokerage, introduced a program last July called Unlimited Advantage that offers investors the choice of paying a yearly fee, rather than commissions, for unlimited online trades and one-on-one advice from a financial consultant.

It promotes the plan with TV commercials that feature disbelieving investors asking, in effect, ``What's the catch?''

Jeff Bennett, a Merrill Lynch first vice president who works on the Unlimited Advantage program, said the brokerage is opening nearly 2,000 new Unlimited Advantage accounts every day. Merrill Lynch has more than 5 million clients.

``However our clients want to do business - the traditional commission, a fee or some combination - we want to provide. The market will tell us which dominates over time,'' Bennett said.

``The financial advisory business ... is on the brink of a major evolution,'' Hurley wrote in his 1999 study, which is causing a stir in the financial-planning business.

``Clients are better informed than in the past and demanding better advice for their money.''

Hurley predicts a wave of new competition from financial giants that will drive down fees and threaten smaller companies.

But financial planners - the mostly small, independent enterprises that seemingly would be in the cross hairs - welcome the change. Apparently without exception, they view it as vindication of the service-oriented approach they have advocated.

``I want to know if they have a will that's current - and if they know what it says,'' said Karen Christoffel at the Fort Worth office of Wells Fargo Bank. ``Everyone needs to provide for their children. Everyone needs to look into the future.''

That's classic financial planning strategy: Ensure that dependents are provided for, examine how assets are deployed by using standards of risk and return, take into consideration the client's lifetime goals.

Many financial advisers are moving toward a fee that is a percentage of the client's assets under management. A common fee is 1 percent.

``It's a better system,'' says Mark Henderson, a financial planner at Asset Preservation Group in Bedford, Texas. ``There are some fees that are too high, but the market will dictate that they come down rapidly. For the client with $250,000 or more, they absolutely like this system.''

He says his clients have an average of $500,000 in invested assets.

``It boils down to the value you receive,'' he says. ``My clients have full access to me.''

``If it costs $400, they're not going to do it,'' Henderson says, so he uses a fee structure that poses no barriers.

There's another ``no barriers'' approach, of course. It's called the Internet, and it's got more information than any investor could possibly digest and most of it is free.

But online investment advisory services offer to make some sense of all this.

For example, for absolutely no charge, any consumer can jump on the Internet and visit www.financialengines.com, a Web site that offers a retirement-planning preview.